OptionsHouse

Options Trading News

October 3, 2013  Thu 3:47 AM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
A huge put spread in the S&P 500 Index PM options is positioning for the possibility of a steep selloff in the coming weeks.

More than 54,000 SPXPM options traded, not far off the total open interest but far above the daily average of just 1,808 contracts in the last month. The action came almost entirely in an October put spread, as a trader bought the 1550 puts in big blocks for $1.95 and $2 while selling the 1500 puts for $1.  

The trader is spending $1 on this vertical spread, which is the maximum amount at risk. The maximum gain on this trade is $49, which would be realized if the S&P 500 is below $1500 at the October expiration in just over two weeks, which carries it just past the federal debt-ceiling deadline. (See our Education section)

The regular monthly SPX options expire on the morning of that same day. The weekly and quarterly options, on the other hand, are PM-settled. So the SPXPM options really come into play only on the Friday of the regular expiration and are not that widely traded.

But these contracts are clearly timed around the debt ceiling and are poised to make a huge profit if things go very badly. As such, this is very likely "tail-risk hedge" as opposed to an outright bearish bet.

The S&P 500 was down just 1.13 points to 1693.87 at yesterday's close. It was at an all-time high of 1729.86 two weeks ago and last below 1500 in late February.
Share this article with your friends


Related Stories

SPX

Stocks edge lower before key data

March 2, 2015

S&P 500 futures are down 0.1 percent, while most of Europe is off about 0.5 percent. Asia was mostly higher overnight, bolstered by an interest-rate cut and Chinese manufacturing numbers.

SPX

ISM data kicks off busy news week

March 2, 2015

This week brings key macroeconomic headlines from both sides of the Atlantic, starting with the Institute for Supply Management's manufacturing index today at 10 a.m. ET.

SPX

Stocks in holding pattern near highs

February 27, 2015

S&P 500 futures are down 0.15 percent but are less than a percentage point below Wednesday's peak. Most overseas markets were little-changed, aside from India, which rallied almost 2 percent.

SPX

GDP, Chicago PMI lead calendar

February 27, 2015

The Commerce Department will announce revised gross domestic product for the fourth quarter at 8:30 a.m. ET, followed by the Chicago Purchasing Managers index follows at 9:45 a.m. ET.

SPX

Futures inch higher after key data

February 26, 2015

S&P 500 futures are up about 0.1 percent ahead of key economic reports, while European markets gained about 0.3 percent on the heels of confidence numbers. Asia was strong overnight.

Invest Like a Monster - Las Vegas: March 13-14

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Webinar Recording

Turbo Charge Your Trading Profits

Education & Strategy

The Strike-Based Greeks

The other Greeks (Gamma, Vega, and Theta) are calculated by using month and strike data, and not by individual option. These are called strike-based Greeks. Gamma, Theta, and Vega are all strike-based Greeks

View more education articles »